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This is arguably the most important conversation of the day. Libby Cantrell is with the Pacific Investment Management Company PIMCO, and she is expert on Washington process, and she joins us right now, the President elect's going to want to run this from the White House with some form of autocratic certitude. Who knows what it's going to be. Where are the checks and balances if we presume a Republican Senate fifty five senators back to two thousand and five,
maybe a House maybe Democrat, maybe a Republican. Where does Libby Cantrell see the checks in the balances of our legislation?
Yes, well, good morning.
So so the Senate looks almost definite that Republicans will have a fifty three forty seven majority, and then to Nevada and Mission again depending on how those states are called. So you know, fifty three forty seven a bit of a check, right. You need sixty votes still in the Senate to pass major legislation, except for tax bills, which can be passed by a budget reconscillation, which only requires
fifty votes. People's eyes glaze over, understandably, but it's actually quite yes, I know, but it's actually but it is actually quite important. The House, however, looks like it's going to be very close. It will likely be kept in the kind of the Republican column, but maybe they only.
Have one two three seat majority with it.
That matters within American political punditry. Let's go like all the TV networks in that is our legislation, our law going to be run out of sixteen hundred Pennsylvania Avenue. How do you respond to that?
Look, I think from an economic perspective, there are many things that Trump can do unilatterly that he's already talked about doing.
He will increase.
Tariffs, and I think our view is that this is an ideology of his that has been you know, for his entire public life. So we're expecting tariffs to go up. Now you know how much they go up, and what that exact policy looks like, I think reminds to be seen. Immigration he can do unilaterally in terms of slowing the flow and basically you know, stopping stopping the border. But outside of that, I think this is really quite important
from uh, you need the you need the Congress. So the big, bigger majority in the Senate is important he can get all of his folks confirmed.
That's going to be very important for him.
But if he doesn't have a bigger majority in the House, it's going he'll be able to pass things for sure, but it's going to be a lot more of a negotiation than I think what maybe the market expects right now about.
The financial services industry. Talk about an industry that feels that it's has with maybe it's fair share of regulations. What do we know about the Trump administration and how they view the financial services industry.
Yeah, so I think a couple of things, just to you know, for folks listening, you know, there are a few things that a few regulators that Trump can replace basically date on one. That's the CFPB, the Consumer of Financial Protection Bureau, the FHFA, which oversees Fanny and Freddie, the OCC and then he can likely nominate the new chairs of the SEC and the CFTC, but that will take time.
The FED, however, it's.
Pretty clear that he cannot do anything with Chairman Powell. So Powell's here here to stay at least until twenty twenty six when his termo's chair is over. So in terms of like putting fingerprints on financial regulation. There are areas where he absolutely can do this sort of day one, but basically everything else in terms of you're talking about Basil three end game, that will take some time.
But to be clear here, the direction of travel is clear.
There's going to be a softer touch on financial regulation, and that's why financials are.
I guess it's bipartisan. I mean, you know this Libby viscerally, there's got to be a collegiality. Howard Baker talking to Sam Irvin. Is it gone?
Is it gone?
I don't.
I mean I think Look, I think that that people come to Washington in order to get things done. And given that President Trump is coming to the presidency with a very strong mandate and a pretty nice majority at least in the Senate. I mean, the folks on the Democratic side, if they want to see anything get done, they're going to have to work with, you know, with President Trump.
Now, I may they may have to hold their nose just.
Based on kind of the Twitter reaction, but I think that, yeah, people come to Washington and in order to govern and to govern, you know, it's a compromise.
It's a great insight the Truman and Dewey didn't have to worry about Twitter as well. And my all night are gir again forcing me to have an all nighter. I neglected to say for Governor need Lamont that his wife Annie Lamont is on the board of Bloomberg LP. That was my folks, my major folks this morning.
Hey Lebby.
If I'm an M and a banker, if I'm an M and a attorney, I think I'm pretty happy here because the concern here of the last number of years has been, boy, it's tough to get deals through the regulatory particularly the Federal Trade Commission. There's been some calls some change in leadership there. How do you think we may see that reflected in the Federal Trade Commission, maybe the Department of Justice.
Yeah, so I think that An important thing to keep in mind is actually that Lena Kahn's term was actually expired the third week of September, so effectively she is a lamed duck. If Harris had been elected, she would have had to either renominate her or nominate somebody else. Now, of course Trump will not. He will he will choose somebody else. So that is another regulatory change that he is going to be able to bring about you.
Know, pretty much in short order.
Now he's going to course have to get that person confirmed by the US Senate and what have you.
But to your point, I mean, this is.
Absolutely kind of risk positive in terms of well, folks.
I need some drama the day after an election. Is Libby Cantra willing to say MEGS seven regulation by Washington goes away?
No, And I think this is actually quite important. So executive orders will go away. But actually deregulation takes a lot of time. Usually it takes years. What I think that the market is understandably and rightfully responding to is the absence of new regulation and just a more you know, just more clarity in terms of the regulatory landscape.
I mean the thing about President Biden.
Even though he ran more as a centrist Democrat back in tw twenty twenty, you know, he really nominated and was able to get confirmed some pretty ideological folks on the regulatory side, and that is going to be a big chef. But again we shouldn't expect necessarily deregulation. We will see some executive orders unwound that will help traditional energy, in particular the LG export pause, for instance, is likely to go away kind of day one.
But outside of that, deregulation is it takes all? It takes much.
A mental Arguably the biggest issue for corporate Wall Street is taxation. What's your call on taxation under Trump?
Yes, so this is actually where again sort of my nummy as it may be, where the.
Majority of the Chamber of majorities actually do matter.
Yeah.
So you know, assuming that the Republicans keep the House, they will likely be able to get through an extension of all of the Trump task cuts on the individual side. Now, remember there are no no expiration on the corporate tax side, so that is likely not going to change. I would sort of fade the idea that it's going to decrease
significantly the deficits of six and a half percent. Unlikely that, you know, republic He's gonna be able to get Republican unanimity to do something that actually you know, costs you know, billions hundred billion.
Live me thirty eight seconds. John from New Jersey emails in and says all I care about is assault text. No Trump did it.
He should have to prep.
Then, right, But the salt text stays the.
Salt, So the salt cap, which ten thousand. Yeah, so if that expires and if Converse doesn't do anything that's fully reinstated, that is very unlikely. It cost about a trillion dollars over ten years. I do think that Trump will have pressure to increase the cap. Maybe it's to twenty thousand, maybe it's even higher, maybe it's to forty thousand.
So maybe you're called from New Jersey will be happy with that.
But in terms of the reinstatement of the salt deduction, that is very unlikely. It is very expensive. It's about again, about trillion dollars over ten years.
What a yields do in your space? Are yields inflation yields? Worry about the fiscal deficit? Is that a constraint for this political revelution?
That a constraint from Washington. I'm not sure that they understand what a curf steepner is. For instance, I kind of doubt it.
But obviously the bond market is reacting right, and that's you know, the sting. Now again, we would have made, I think, made the argument that regardless of whether it's Harris or Trump, both would.
Have been bad for the deficit.
We were looking at high deficits regardless of who won, so we would have said that the curse hast even regardless.
Lily comeback the next time, the Denver Broncos win. Let me cantrol a clinical there, wishing Laway would return at some point